ABV-INDIAN INSTITUTE OF INFORMATION

TECHNOLOGY AND MANAGEMENT

Entrepreneurship and Innovation
Assignment
Business Plan

Submitted to:Dr. Manoj Dash

Submitted by:Sanil Khare (2013MBA-25)

Health Fitness Program

Corporate Fitness

Executive Summary
Corporate Fitness will serve -area businesses, helping them to become more productive, while
lowering their overall costs.
Our business is based on two simple facts:
1.

Healthy employees are more productive than chronically ill employees.

2.

It costs less to prevent injuries or illnesses than to treat them after they occur.

At Corporate Fitness, we tie worker productivity directly to the health care issue. We believe that
traditional approaches to the current health care crisis are misdirected. These traditional efforts
are what we call reactive--that is, they wait until after the worker has been stricken with illness or
injury, and then pay for the necessary treatments. Our approach, which emphasizes prevention
and good health promotion, is much more proactive.
By helping employees change their behavior patterns and choose more healthy lifestyles,
Corporate Fitness will lower companies' health care expenditures, while raising worker
productivity. Health care expenditures will decrease due to reduced medical insurance premiums,
reduced absenteeism, reduced turnover rates, reduced worker's compensation claims, reduced
tardiness, shorter hospital stays, etc.
The state of America's health care crisis, coupled with current demographic changes, threaten to
not only exacerbate the crisis, but further erode worker productivity as well. These

environmental factors coupled with the local competitive situation signal a favorable opportunity
in this market. We feel the time is right for Corporate Fitness.

1.1 Objectives
1.

Provide wellness strategies/programs to businesses in the downtown Seattle area.

2.

Create working relationships with 20 companies by the end of year one.

3.

Expand Corporate Fitness into Portland, Oregon by the end of year two.

1.2 Keys to Success

Corporate Fitness' keys to success are:

Marketing services to companies and individuals.

Recruitment of experienced managerial talent.

Dedication and hard work of the founders.

Raising productivity.

Lowering overall costs.

1.3 Mission
Corporate Fitness is a health service that helps businesses and individual workers attain one of
the greatest gifts of all--that of good health. Personal gains, such as improved self-esteem and
self-motivation, combined with measurable benefits will create tremendous advantages for both
the employer and the employee.

Company Summary
Corporate Fitness is based on the belief that healthy employees are more productive and efficient
employees.

START-UP FUNDING

Start-up Expenses to Fund

Start-up Assets to Fund

TOTAL FUNDING REQUIRED

29

30

Assets

Non-cash Assets from Start-up

Cash Requirements from Start-up

Additional Cash Raised

Cash Balance on Starting Date

TOTAL ASSETS

Liabilities and Capital

Liabilities

Current Borrowing

Long-term Liabilities

10

Accounts Payable (Outstanding Bills)

Other Current Liabilities (interest-free)

TOTAL LIABILITIES

Capital

Planned Investment

10

Investor 1

Investor 2

Investor 3

Additional Investment Requirement

TOTAL PLANNED INVESTMENT

Loss at Start-up (Start-up Expenses)

TOTAL CAPITAL

TOTAL CAPITAL AND LIABILITIES

Total Funding

20

( 290

( 90

30

START-UP

Requirements

Start-up Expenses

Legal

Stationery etc.

Brochures

Insurance

Rent

Expensed Equipment

Utilities

Leasehold improvements

14

Other

TOTAL START-UP EXPENSES

29

Start-up Assets

Cash Required

Other Current Assets

Long-term Assets

TOTAL ASSETS

Total Requirements

30

2.3 Company Locations and Facilities

Corporate Fitness headquarters are located within the first club located in downtown . Upon
expansion, offices will be moved to a different location, not within any individual club.

Services

Business ratios for Corporate Fitness indicate strong financial growth and an impressive chance
for investment opportunities, making expansion and further development both very possible.
3.1 Service Description
Corporate Fitness provides wellness strategies/programs to businesses in the downtown Seattle
area. A wellness strategy is a long-term effort, combining both health-promotion and exerciserelated activities designed to facilitate positive lifestyle changes in members of a company's
work force.
Corporate Fitness will work with a company's senior management to help it develop a mission
statement for its wellness program. The client company's employees will undergo a health-risk
analysis, following which each employee will be given the opportunity to meet with a health
professional to design a personalized health program.
Finally, Corporate Fitness will furnish employee progress reports to senior management with
which to carry out the incentive program and generally monitor changes in the behavior of its
work force.

3.2 Competitive Comparison

Corporate Fitness is not primarily a health club, as are the majority of competitors. This
organization is in the business of health care cost management. The major function is to work
with client companies to implement wellness strategies. Many employees will become
benefactors of such strategies without ever visiting the fitness facility, as exercise is only one
facet of overall wellness.
Corporate Fitness has a vested interest in each individual member of every wellness program,
unlike many competitors. An integral part of this service is following up and monitoring the
individuals.
3.3 Fulfillment

All fitness machines are purchased from exercise equipment distributors, while all medical
equipment is bought from a reputable supply company.
Important demographic changes are taking place in America that point to the importance of
worker productivity in coming decades.

16 million new jobs will be created by the year 2000, but there will only be 14 million
workers to fill them.

By 1995, women will comprise one-third of the work force, a ratio that will increase to
one-half by the year 2000.

An estimated 80 percent of jobs to be filled in the immediate future will require more
than a high-school education. Only 74 percent of Americans, however, finish high school,
and only 67 percent graduate with adequate skills.

The number of skilled workers available to fill new jobs is decreasing, meaning that
employers are facing more severe competition for labor. Thus, the health and productivity of
each employee becomes crucial to a company's success.

4.1 Market Segmentation

The market for corporate fitness is not particularly segmented, as potential customers include all
downtown businesses that offer their employees some type of medical benefits, are experiencing
escalating health care costs, and wish to more effectively manage those costs.
Corporate Fitness, however, segments its services for individual organizations. Corporate Fitness
works with senior management to develop mission statements and provide incentive plans, and
with employees to design personalized health and fitness programs.

MARKET ANALYSIS

YEAR 1

Potential Customers

Corporate Employees

YEAR 2

YEAR 3

YEAR 4

YEAR 5

Growth

35%

CAGR

750

1,013

1,368

1,847

2,493

35.03%

Manufacturing
Exployees

15%

250

288

331

381

438

15.05%

Industry Employees

25%

500

625

781

976

1,220

24.98%

Other

15%

300

345

397

457

526

15.07%

Total

26.96%

1,800

2,271

2,877

3,661

4,677

26.96%

4.2 Service Business Analysis

Several small fitness facilities are currently in operation in the downtown area, none of which
cater their services to corporations. These organizations are primarily exercise facilities with
little emphasis on personalizing individual plans to improve working performance.
4.2.1 Main Competitors
The three main competitors for Corporate Fitness are:

YMCA-market is lower-income families and/or students who want accessibility and

affordability of fitness facilities.

Gold's Gym-services are targeted toward those motivated and dedicated individuals who
workout five to seven times per week.

Better Bodies-aimed at casual fitness-seekers who do not workout with a high intensity
but still desire the status and recognition.

4.2.2 Distributing a Service

Few fitness centers are located in the downtown Seattle area, while the majority are found in
suburban neighborhoods and shopping complexes. Those in the downtown area are located close
to professional centers containing restaurants, parks, and other recreational activities. In

suburban locales, these establishments are often found close to grocery stores, restaurants, and
retail stores.
4.2.3 Business Participants
Participants in the fitness industry include national, regional, and local organizations. On the
national level, companies such as Gold's Gym and the YMCA offer exercise facilities and
training programs. At the regional level, firms such as Better Bodies and Bally's offer
comparable services, while locally, privately-owned businesses provide similar, but less
extensive services to exercise-seekers.

Strategy and Implementation Summary

Corporate Fitness' strategy is based on raising worker productivity and lowering overall costs for
businesses. The most logical way to approach these factors is through a healthy work force.
Companies that implement wellness programs with Corporate Fitness will be encouraged to look
at the "big picture" regarding the effects of its wellness programs. Thus, one marketing goal is to
persuade more traditionally managed companies that wellness can work for them.
By tailoring services and developing customized programs for companies and individual
employees, Corporate Fitness will develop a reputation for quality and customer service.

5.1 Milestones
Sample Milestones topic text.
The milestones table and chart show the specific detail about actual program activities that
should be taking place during the year. Each one has its manager, starting date, ending date, and
budget. During the year we will be keeping track of implementation against plan, with reports on
the timely completion of these activities as planned.
5.2 Marketing Strategy

Corporate Fitness will begin by targeting small- to medium-sized businesses in the downtown
Seattle area. The first task is to convince senior executives of the benefits and needs of wellness
programs. This will be accomplished by aggressively pursuing interaction and relationships with
business professionals who would profit from using this service. Once a strong image is
established, Corporate Fitness will use similar strategies to market its services to larger
corporations in Seattle and other areas of expansion.
5.2.1 Pricing Strategy
Prices for using Corporate Fitness' services are comparable to those of higher-end fitness centers.
An employee choosing to utilize a Corporate Fitness center will pay a 100 monthly fee. For each
employee enrolled in the general wellness program, regardless of whether or not they use the
fitness facility, the employer will pay 150 annually. The prices reflect the quality of the
equipment and service.
5.2.2 Promotion Strategy
Following initial promotional activity through advertisements in newspapers, magazines, and on
television and radio, Corporate Fitness will significantly reduce its promotional efforts in the
hope that word-of-mouth will attract potential clients. Promotional activity will still be utilized
through these media outlets, but only minimally.

5.3 Sales Strategy

This proprietary information was omitted from the sample plan.
5.3.1 Sales Forecast
Anticipated sales are shown in the accompanying table and chart.

SALES FORECAST

YEAR 1

YEAR 2

YEAR 3

Sales

539,075

650,750

825,600

Other

539,075

650,750

825,600

Direct Cost of Sales

Year 1

Year 2

Year 3

Cost of Sales

33,000

44,000

55,000

33,000

44,000

55,000

Sales

TOTAL SALES

Other

Subtotal Direct Cost of Sales

Management Summary
Corporate Fitness is currently a small organization headed by three individuals. The
CEO/Director of Sales and Marketing oversees the activities of the Director of Health and
Wellness Programs and the Director of Finance and Administration.

The Director of Health and Wellness Programs is the contact for and supervisor of the fitness
specialists and health educators and promoters.
The Director of Finance and Administration provides guidance for fitness facility attendants.
As the firm grows and expands, more director positions will be added as needed.
6.1 Organizational Structure
There are currently two divisions of Corporate Fitness: "Health and Wellness" and "Finance and
Administration." With the growth of the company, more divisions will be created as the demand
for services increases.
6.2 Management Team

Dave Jensen: CEO and Director of Sales and Marketing. Mr. Jensen is responsible for
providing leadership, direction, and control for all aspects of the company's activities in
order to realize optimum profits compatible with the best long- and short-term interests of
the shareholder, employees, consumers, and public. Mr. Jensen completed his undergraduate
degree at the University of North Carolina, and then earned his MBA from the University of
Texas.

Steve Perkins: Director of Finance and Administration. Mr. Perkins is responsible for
guiding and directing financial and control activities of the company in a manner designed
to protect assets, meet reporting requirements, and effectively plan for and audit the
financial needs of the firm. Mr. Perkins completed his undergraduate work at the University
of California-Berkeley, and received his MBA from Vanderbilt University.

Robert Gomez: Director of Health and Wellness Programs. Mr. Gomez will assume the
overall management of the health promotion program, including organizing and conducting
health education programs. Mr. Gomez received his undergraduate degree in Exercise and
Movement Science from the University of Oregon.

6.3 Management Team Gaps

The gaps of Corporate Fitness' management team include:

Lack of experience in the fitness industry.

Minimal expertise in areas of finance and accounting.

Strong desire for financial prosperity immediately with little patience for minimal
profitability.

6.4 Personnel Plan

Corporate Fitness' personnel staff requirements are shown in the table below.

PERSONNEL PLAN

YEAR 1

YEAR 2

YEAR 3

Fitness Center Management

15,000

15,000

15,000

Program Director

54,000

54,000

54,000

Personnel Manager

36,000

36,000

36,000

Health/Fitness Specialists

33,000

33,000

33,000

Attendants

12,000

12,000

12,000

150,000

150,000

150,000

TOTAL PEOPLE

Total Payroll

Financial Plan

Consulting revenue will make up approximately 85 to 90 percent of total revenue, with

the rest coming from service revenue.

Salaries and rent are the two major expenses, while depreciation is another significant
cost. Although the purchasing of fitness, medical, and office equipment is expensive,
constant replacement will be needed to maintain a competitive edge.

In order to maintain steady gross margins, salaries and advertising expenses are not likely
to increase within the first two years of operation, unless cash flows significantly increase.

7.1 Important Assumptions

Three assumptions for Corporate Fitness are:
1.

A constantly growing economy without any major recession or boom.

2.

No unpredictable changes in fitness, medical, or office equipment.

3.

No major national or global events that threaten the stability and health of the country
and its citizens.

GENERAL ASSUMPTIONS

YEAR 1

YEAR 2

YEAR 3

3.00%

3.00%

3.00%

Long-term Interest Rate

10.00%

10.00%

10.00%

Tax Rate

25.00%

25.00%

25.00%

Plan Month

Current Interest Rate

Other

7.2 Key Financial Indicators

The most important financial indicators are net increase in cash and net income. Net increase
from cash will exemplify the relationship between net income and net cash from operating
activities. The greater the increase is, Corporate Fitness has that level of financial strength at that
point in time.

7.3 Break-even Analysis

Corporate Fitness' break-even point is computed in the table below, comparing sales and monthly
expenses. Sales forecasts indicate that units sold and monthly sales are expected to be much
greater than the break-even point mentioned in the table.

BREAK-EVEN ANALYSIS

Monthly Revenue Break-even

Assumptions:

Average Percent Variable Cost

Estimated Monthly Fixed Cost

7.4 Projected Profit and Loss

Sales are predicted to increase each month with first year annual sales totaling close to a halfmillion dollars. Gross margin, likewise, is expected to increase correspondingly.

PRO FORMA PROFIT AND LOSS

YEAR 1

YEAR 2

YE

539,075

650,750

82

Direct Cost of Sales

33,000

44,000

Other Costs of Sales

33,000

44,000

Gross Margin

506,075

606,750

77

Gross Margin %

93.88%

93.24%

93

150,000

150,000

15

Sales

TOTAL COST OF SALES

Expenses

Payroll

Marketing/Promotion

25,200

25,200

7,200

7,200

Rent

60,000

60,000

Utilities

25,200

25,200

5,400

5,400

27,600

27,600

Payroll Taxes

Other

Total Operating Expenses

300,600

300,600

24

Profit Before Interest and Taxes

205,475

306,150

52

EBITDA

212,675

313,350

53

Depreciation

Insurance

Leased Equipment

Interest Expense

10,449

8,500

Taxes Incurred

48,757

74,413

12

Net Profit

146,270

223,238

38

Net Profit/Sales

27.13%

34.30%

46

Compared to total sales, net profit will increase each month and is predicted to increase for 1995
through 1997.
7.5 Projected Cash Flow
Ordinary cash flow will increase significantly while expenses remain relatively static, with only
minimal increases. We plan to take out a short-term loan to cover our receivables and other
contingencies in month one, and repay it in month 12.

PRO FORMA CASH FLOW

YEAR 1

Cash Received

YEAR 2

YEAR 3

Cash from Operations

Cash Sales

215,630

260,300

330,240

Cash from Receivables

230,395

371,174

465,179

SUBTOTAL CASH FROM OPERATIONS

446,025

631,474

795,419

36,000

New Other Liabilities (interest-free)

New Long-term Liabilities

Sales of Other Current Assets

Sales of Long-term Assets

New Investment Received

Additional Cash Received

Sales Tax, VAT, HST/GST Received

New Current Borrowing

SUBTOTAL CASH RECEIVED

482,025

631,474

795,419

Year 1

Year 2

Year 3

Cash Spending

150,000

150,000

150,000

Bill Payments

206,122

277,578

280,145

SUBTOTAL SPENT ON OPERATIONS

356,122

427,578

430,145

36,000

Expenditures

Expenditures from Operations

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out

Principal Repayment of Current Borrowing

Other Liabilities Principal Repayment

Long-term Liabilities Principal Repayment

10,000

10,000

10,000

9,600

9,600

9,600

411,722

447,178

449,745

Net Cash Flow

70,303

184,295

345,675

Cash Balance

80,303

264,599

610,273

Purchase Other Current Assets

Purchase Long-term Assets

Dividends

SUBTOTAL CASH SPENT

PRO FORMA BALANCE SHEET

YEAR 1

YEAR 2

YE

Cash

80,303

264,599

61

Accounts Receivable

93,050

112,326

14

Other Current Assets

173,353

376,925

75

Long-term Assets

9,600

19,200

Accumulated Depreciation

7,200

14,400

Assets

Current Assets

TOTAL CURRENT ASSETS

Long-term Assets

TOTAL LONG-TERM ASSETS

2,400

4,800

175,753

381,725

Year 1

Year 2

29,483

22,217

Current Borrowing

Other Current Liabilities

SUBTOTAL CURRENT LIABILITIES

29,483

22,217

Long-term Liabilities

90,000

80,000

119,483

102,217

TOTAL ASSETS

Liabilities and Capital

75

Current Liabilities

Accounts Payable

TOTAL LIABILITIES

Paid-in Capital

Retained Earnings

Earnings

TOTAL CAPITAL

TOTAL LIABILITIES AND CAPITAL

Net Worth

200,000

200,000

20

( 290,000)

( 143,730)

146,270

223,238

38

56,270

279,507

66

175,753

381,725

75

56,270

279,507

66

7.6 Projected Balance Sheet

The balance sheet indicates that at the end of the first year of operation, net worth will be
positive and constantly increasing through the end of 1997.

7.7 Business Ratios

The following table outlines some of Corporate Fitness' more important business ratios. The final
column, Industry Profile, details specific ratios based on the Physical Fitness Facilities industry
as it is classified by the Standard Industry Classification (SIC) code, 7991. These ratios indicate

strong financial growth and an impressive chance for investment opportunities, making
expansion and further development both very possibl

RATIO ANALYSIS

YEAR 1

YEAR 2

YEAR 3

INDUSTRY
PROFILE

0.00%

20.72%

26.87%

4.96%

Accounts Receivable

52.94%

29.43%

18.75%

5.74%

Other Current Assets

0.00%

0.00%

0.00%

34.12%

Sales Growth

Percent of Total Assets

Total Current Assets

98.63%

98.74%

99.05%

39.86%

Long-term Assets

1.37%

1.26%

0.95%

60.14%

TOTAL ASSETS

100.00%

100.00%

100.00%

100.00%

Current Liabilities

16.78%

5.82%

3.04%

21.71%

Long-term Liabilities

51.21%

20.96%

9.21%

29.51%

Total Liabilities

67.98%

26.78%

12.25%

51.22%

NET WORTH

32.02%

73.22%

87.75%

48.78%

100.00%

100.00%

100.00%

100.00%

Gross Margin

93.88%

93.24%

93.34%

100.00%

Selling, General & Administrative Expenses

66.74%

58.93%

46.42%

72.76%

Percent of Sales

Sales

Advertising Expenses

1.34%

1.11%

0.87%

2.44%

38.12%

47.05%

63.47%

3.01%

Current

5.88

16.97

32.59

1.05

Quick

5.88

16.97

32.59

0.73

67.98%

26.78%

12.25%

2.72%

Pre-tax Return on Net Worth

346.59%

106.49%

77.45%

61.25%

Pre-tax Return on Assets

110.97%

77.98%

67.96%

7.03%

Additional Ratios

Year 1

Year 2

Year 3

Net Profit Margin

27.13%

34.30%

46.92%

n.a

Return on Equity

259.94%

79.87%

58.09%

n.a

Profit Before Interest and Taxes

Main Ratios

Total Debt to Total Assets

Activity Ratios

Accounts Receivable Turnover

3.48

3.48

3.48

n.a

55

96

94

n.a

7.99

12.17

12.17

n.a

27

35

29

n.a

3.07

1.70

1.09

n.a

Debt to Net Worth

2.12

0.37

0.14

n.a

Current Liab. to Liab.

0.25

0.22

0.25

n.a

Collection Days

Accounts Payable Turnover

Payment Days

Total Asset Turnover

Debt Ratios

Liquidity Ratios

Net Working Capital

143,870

354,707

729,682

n.a

19.67

36.02

69.87

n.a

Assets to Sales

0.33

0.59

0.92

n.a

Current Debt/Total Assets

17%

6%

3%

n.a

Acid Test

2.72

11.91

26.42

n.a

Sales/Net Worth

9.58

2.33

1.24

n.a

Dividend Payout

0.00

0.00

0.00

n.a

Interest Coverage

Additional Ratios